(CN) – Communications service provider CenturyLink Inc. faces a shareholder derivative action over company policies that allowed employees to add services to customer accounts without the customer’s permission, which resulted in millions of dollars worth of unauthorized charges.
CenturyLink provides internet and satellite television services in 37 states. The July 3 complaint against CenturyLink was filed by lead plaintiff Michael Barbree in U.S. District Court in the Western District of Louisiana.
“CenturyLink’s illicit practices were designed to allow CenturyLink to gain advantage over its competitors and increase profits. CenturyLink’s revenues were the product of illicit conduct and were unsustainable,” the 111-page complaint states.
In June 2017, Bloomberg published an article that claimed a former employee, Heidi Heiser, was fired for blowing the whistle on the telecommunications company’s high-pressure sales culture. The article called attention to the service charges that were forced upon unsuspecting customers and Heiser’s termination.
In her whistleblower complaint in an Arizona superior court, Heiser claimed she was terminated for reporting to her supervisors and the CEO that she refused to take part in the unlawful billing practices.
“The defendants maintained an incentive program for their employees and agents which provided financial incentives to charge customers for services they did not order and/or to overcharge customers,” Heiser’s complaint charged. “Rather than uphold its duty to act in good faith and to ensure that it carefully charged consumers only in the correct amounts … the defendant shifted that burden to consumers and essentially dared them to locate the overcharges and then demand refunds.”
After Heiser’s story broke, the price of CenturyLink shares dropped $1.23 per share to close at $25.72 per share, a decline of nearly 5 percent on volume of 43 million shares, according to the complaint.
CenturyLink allegedly downplayed the impact of the Bloomberg article, pleading ignorance on the part of the company’s executives and claiming that there was no knowledge of the practices until after the lawsuit had been filed, according to the complaint.
“These practices were recorded in the company’s computer systems, regularly reported to the company’s executives and driven by a punitive sales quota system they approved,” according to the complaint.
The action seek damages breach of fiduciary duties and an order directing the company to improve corporate governance and internal procedures to protect the company and its investors.
Barbree is represented by Patrick W. Pendley of Pendley, Baudin & Coffin and Thomas J. McKenna and Gregory M. Egleston of Gainey McKenna & Egleston